1. Economic Problems of
Developing Countries

2. Economic Problems of Developing Countries
The Problem of Underdevelopment

3. THE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY 2

4. GNY per head as % of US GNY per head: 2000 (using ppp exchange rates)

5. THE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY
differences in mortality and health 2

6. THE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY
differences in mortality and health
other differences 2

7. Selected world statistics

8. Selected world statistics

9. Selected world statistics

10. Selected world statistics

11. Selected world statistics

12. Selected world statistics

13. Selected world statistics

14. Selected world statistics

15. Selected world statistics

16. Selected world statistics

17. THE PROBLEM OF UNDERDEVELOPMENT
Differences between developing countries
resources and climate
infrastructure
cultural and social factors
degree of industrialisation
relations with developed world 2

18. THE PROBLEM OF UNDERDEVELOPMENT
Measuring development
basic needs approach
advantages of this approach
disadvantages of this approach
using GNY statistics
the Human Development Index 4

19. Human Development Index (HDI) for selected countries (1999)

20. Human Development Index (HDI) for selected countries (1999)

21. Human Development Index (HDI) for selected countries (1999)

22. Human Development Index (HDI) for selected countries (1999)

23. Human Development Index (HDI) for selected countries (1999)

24. Human Development Index (HDI) for selected countries (1999)

25. Human Development Index (HDI) for selected countries (1999)

26. Human Development Index (HDI) for selected countries (1999)

27. Human Development Index (HDI) for selected countries (1999)

28. Economic Problems of Developing Countries
International Trade and Development

29. INTERNATIONAL TRADE AND DEVELOPMENT
Role of international trade in economic development
importance of trade
trade strategies
primary outward-looking strategy
secondary inward-looking strategy
import-substituting industrialisation (ISI)
secondary outward-looking strategy
exporting manufactures 5

30. INTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy
importance of primary exports
justification for exporting primaries
comparative advantage (Heckscher–Ohlin)
vent for surplus; engine for growth
weakness of traditional trade theory
problems for primary exporters: long term
slow growth in exports
rapid growth in imports
problems for primary exporters: short term
price and output fluctuations 6

31. World primary commodity prices (1990 = 100)

32. World primary commodity prices (1990 = 100)

33. INTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy
importance of primary exports
justification for exporting primaries
comparative advantage (Heckscher–Ohlin)
vent for surplus; engine for growth
weakness of traditional trade theory
problems for primary exporters: long term
slow growth in exports
rapid growth in imports
problems for primary exporters: short term 6

34. INTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy
importance of primary exports
justification for exporting primaries
comparative advantage (Heckscher–Ohlin)
vent for surplus; engine for growth
weakness of traditional trade theory
problems for primary exporters: long term
slow growth in exports
rapid growth in imports
problems for primary exporters: short term
price and output fluctuations 6

35. INTERNATIONAL TRADE AND DEVELOPMENT
Import-substituting industrialisation
the process of ISI
justification
problems of primary-outward looking policies
greater dynamic potential with industrial production
infant industries 7

36. INTERNATIONAL TRADE AND DEVELOPMENT
Import-substituting industrialisation
adverse effects
against comparative advantage
cushions inefficiency
urban bias
damages exports
wide variations in effective protection
social / cultural problems
environmental costs 7

37. INTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures 8

38. Growth rates and export performance of
selected secondary outward-looking countries

39. Growth rates and export performance of
selected secondary outward-looking countries

40. Growth rates and export performance of
selected secondary outward-looking countries

41. INTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation 8

42. INTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy 8

43. INTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy
drawbacks of a secondary outward-looking policy 8

44. Economic Problems of Developing Countries
Structural Problems in Developing Countries

45. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
The neglect of agriculture
problems of urban bias
policies to promote agriculture
problems with these policies
Inappropriate technology
capital-intensity biases
arguments for capital-intensive technology
arguments for labour-intensive technology 9

46. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias 10

47. Limited choice of techniques: one technique only
Capital (K) O
Labour (L)

48. Limited choice of techniques: one technique only
Expansion path c K3
Capital (K) Q3 L3 b K2 Q2 L2 a K1 Q1 L1 O
Labour (L)

49. Limited choice of techniques: one technique only
Assume that
total capital supply is K
total labour supply is L
Capital (K) Q3 K L Q2 Q1 O
Labour (L)

50. Limited choice of techniques: one technique only
With K of capital, only Q2 can be
produced. Only L1 will be required
L - L1 will be unemployed.
Capital (K) Q3 K Q2 L1 Q1 O L
Labour (L)

51. Capital intensity bias
Assume that
the total supply of capital is K, and
the total supply of labour is L.
Capital (K) K L Q1 Q2 O
Labour (L)

52. Capital intensity bias
With competitively determined prices,
the market will clear at point d
with output of Q1 and
price ratio given by the slope of AB A B
Capital (K) d K Q1 Q2 O L
Labour (L)

53. Capital intensity bias
With a lower relative price of capital
(given by slope of line CD)
or a bias in favour of
capital-intensive techniques,
less labour will be employed (L1) and
output will be lower (Q2). A C D
Capital (K) d K L1 Q1 Q2 O L B
Labour (L)

54. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration 10

55. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration
external influences 10

56. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation 10

57. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation
problems of hyper-inflation 10

58. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation
problems of hyper-inflation
monetarist explanations 10

59. STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment
rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation
problems of hyper-inflation
monetarist explanations
structuralist explanations 10

60. Economic Problems of Developing Countries
The Problem of Debt

61. Growth in debt of developing countries: (average annual)

62. Growth in debt of developing countries: (average annual)

63. Growth in debt of developing countries: (average annual)

64. Growth in debt of developing countries: (average annual)

65. Debt ratios and the growth of debt: (average of all developing countries)

66. Debt ratios and the growth of debt: (average of all developing countries)

67. Debt ratios and the growth of debt: (average of all developing countries)

68. THE PROBLEM OF DEBT Effects of the first oil shock 1971–78
Effects of the second oil shock 1979–84
deep world recession
decline in commodity prices
high interest rates
Effects of recessions in early 1990s and early 2000s 11

69. THE PROBLEM OF DEBT
The effects of the debt problem on developing countries
effects on growth
effects on poverty
Coping with debt crises: rescheduling
rescheduling official loans
rescheduling commercial loans 12

70. THE PROBLEM OF DEBT Dealing with debt
structural reform in developing countries
IMF policy recommendations
interventionist solutions
debt swaps
debt forgiveness
the HIPC initiative
Jubilee 2000
subsequent events
should all debt be cancelled and aid increased? 13